by Bob Incollingo
Even after a lifetime of studying construction contract paperwork it never occurred to me that anyone would pay for big-ticket home improvement with a credit card. I was caught up short when a remodeler I know commented about the merchant services charges his company was being billed on credit card payments regularly made by his customers. Those credit card processing fees (also known as “swipe fees”) were eating into his profit margins, and over time summed to thousands of dollars of unwelcome expense.
‘Swipe fees’ takes on a double meaning when job profits are divided with payment networks. Arguably, home improvement contractors don’t really need to accept credit card payments. Credit card processing fees don’t really need to become a cost of doing business. However, every contractor wants to make it easy for the customer to pay their bills on a project. When your customer’s cash flow is stretched and their choices narrow to which bill to pay, you want that bill to be yours.
Other types of businesses - retail stores and restaurants, for example - have a greater need to accept credit card payments, but the swipe fees still bite. This explains the trend of credit cards surcharges popping up in some restaurants, where unless you pay for your meal by cash, a surcharge is automatically added to the bill to cover merchant services charges billed by the credit card company. These surcharges, sometimes termed “convenience fees,” are on their face meant to reimburse the seller for a bill it would not otherwise incur, but for its customer’s use of a credit card in the sale. Just like restaurants and retail stores, contractors who accept credit card payments can pass these merchant services charges through to their customers as well. Depending on the jurisdiction, though, there may be legal limits on how and how much you can impose surcharges for credit card transactions.
Surcharges are legal in New Jersey, but as of August 18, 2023 they are capped by statute to “the actual cost to the seller to process the credit card payment.” (N.J.S.A. 56:8-156.1 and -156.2). In everyday business, this cost should equal or exceed the swipe fee by only a small amount, and the contractor who wants to charge more should be on his guard and ready to prove the difference. A violation of the new statute is an unlawful practice under the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-2 et. seq.) which protects New Jersey consumers from fraudulent and deceptive business practices.
As well as imposing a cap on any surcharge, the new statute includes a disclosure requirement. A New Jersey contractor who imposes a surcharge on a customer to process a credit card payment must first post a sign to “disclose the amount of the surcharge to a customer” and give “clear and conspicuous notice” “at the point of entry and point of sale” of construction goods or services. N.J.S.A. 56:8-156.2 b. There are two exceptions - more like additions - to this general rule. If the seller is processing a credit card payment for a transaction that will occur through an Internet website, a mobile application, or an electronic kiosk, the seller must provide clear and conspicuous electronic notice of the surcharge on the checkout page of the Internet website, mobile application, or electronic kiosk prior to processing the transaction. N.J.S.A. 56:8-156.2 b.(1). Also, if the seller is processing a credit card payment for a transaction that will occur over the telephone, he or she must provide the customer with verbal (i.e., oral) notice prior to processing the transaction. N.J.S.A. 56:8-156.2 b.(2).
Home improvement is already heavily regulated under New Jersey consumer fraud law. The new surcharge cap piles on even more vulnerability to triple damages, shifted attorney fees, and incentivized class actions for charging excessive convenience fees and failing to warn about them up front. Take special note as well that the law is not limited to home improvement contractors. Any contractor who fits the statutory definition of “seller,” being “a person who sells, leases, or rents goods or services to a customer,” is covered by the surcharge cap and notice requirements. N.J.S.A. 56:8-156.1. A contractor working on a commercial project, or working on new residential construction, will also face automatic (“per se”) liability for noncompliance.
Post Script: Although I am not a contractor, I also sell services and I very reluctantly accept credit card payment. I too have a business interest in charging back swipe fees associated with credit card payment of my bills. Although by virtue of the “learned professions” exemption, practicing attorneys are generally outside the reach of consumer fraud law, Vort v. Hollander, 257 N.J. Super. 56 (App.Div.), certif. denied, 130 N.J. 599 (1992), I have a question in my mind as to whether my passing through swipe fees would lie within that exemption. If you would like to see how I handled the new disclosure law on my own website, go to: https://rjilaw.com/robert-j-incollingo-legal-services/and press the red button.
Bob Incollingo is a dedicated South Jersey construction attorney who litigates construction, business, and real estate cases in Gloucester County, Burlington County, and Camden County, New Jersey from his office in Cherry Hill. More articles like this appear on RJILAW.com.
